What You Should Consider Before Getting Construction Equipment Financing
Financing the purchase of construction equipment instead of using cash offer substantial benefits while reducing risks. More importantly, the way you finance must be the result of meticulous planning based upon several factors.
The following are the things to keep in mind as you pursue construction equipment financing:
Fortunately, financing solutions offered by equipment finance companies are usually customizable according to certain accounting, tax or cash flow needs. They offer nearly every loan you can think of that is suitable for your need.
Capital preservation is a big factor when businesses consider financing. Investing in significant capital expenditures usually entails serious financial risk, particularly for less stable companies. Financing instead of spending cash, and the very type of financing involved (whether loan or lease), can help lessen the risk of a capital asset investment that may not bring the expected return. Lease payments, for instance, can typically be adjusted to the level of productivity produced by the equipment.
Maintaining a healthy cash flow and consistent budgeting is another important consideration when planning equipment financing. Rather than significant capital outlays creating substantial budget fluctuations, financing allows even expense planning. Tax considerations must also be made. Full payout leases or equipment loans provide the borrower the option to take depreciation on the equipment acquired; on the other hand, an operating or FMV lease permits the same to pay in smaller amounts with zero depreciation. A loan gives you the option to fix your payments for the foreseeable life of the asset, but a lease is less expensive for the predicted time of use.
Flexibility of Business Cycle
Flexibility is a key part of equipment lease financing. There are leases that permit occasional business fluctuations and decrease monthly payments as a project builds up and as revenue from the equipment or your business’ general situation is still inadequate or unstable. Some leases allow business fluctuations from time to time and reduced monthly payments as a project ramps up while profits generated from the equipment or the total situation of your business is still insufficient or shaky. In certain cases, occasional business fluctuations may be allowed and monthly payments may be lowered while a project tries to gain momentum and your business’ overall situation or gains from the equipment is still volatile or not enough.
Having the latest equipment is crucial in the business environment today. The problem though is that for many businesses, especially those in the construction industry, buying equipment outright is too risky, if not totally impossible. Through financing, they can purchase more and better equipment that otherwise could have been absolutely out of their reach. Again, the key to successful construction equipment financing is to research and discover more about available options. There is no other way to prepare yourself for a wise decision but through valuable info.
Definitely, you should know more about this company from which you would like to obtain financing, including their customer service record. Don’t ever take such issues for granted. Sometimes, this is as simple as digging into each page on their website instead of just their homepage.